Charles Tiebout

Abstract

Charles Tiebout (b. 1924–d. 1968) was an American economist, best known for his model of consumer-voters choosing where to live based on the combination of taxes and services in candidate jurisdictions. The model was proposed as a counterexample to the free rider problem in public goods—that is, that consumers will not voluntarily reveal their preferences for non-excludable goods. For goods that are local in nature—Tiebout used the example of a beach of fixed length—consumer-voters have no choice but to reveal their preferences by “voting with their feet,” living in the jurisdiction providing the good and paying the tax price for doing so. The original model relied upon some (extreme) simplifying assumptions, including perfect information, costless relocation (including no impact on household income), and a large number of communities to choose among. The subsequent literature has explored efficiency, equity, and empirical validity. A significant policy question is whether to encourage the large number of jurisdictions that the model requires—what some might disapprovingly call metropolitan fragmentation. Considerable effort has gone into developing a version of the model that corresponds with the reality of American local government organization, in which goods are funded via property taxes and zoning is used to limit access. The model remains a standard in local public finance.